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Tokyo ranked as most expensive city in the world for expats, three other Japanese towns in top 10

Casey Baseel Dec 22, 2016
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But the situation might not be as bad as it sounds.

Human resource consulting firm ECA International carries out an annual study on the most expensive cities in the world for expats, and it’s just announced the results of the latest iteration. Topping the list is Tokyo, which was calculated to be the costliest town for the first time since 2012.

Tokyo jumped all the way up from number 12 in last year’s survey, and was joined in the top 10 by three other Japanese urban centers: Yokohama (ranked fifth), Nagoya (seventh), and Osaka (ninth).

As the capital of an island nation with a developed economy but a shortage of buildable land, Tokyo often finds itself at or near the top of lists like this because of the cost of housing. However, ECA International’s calculations don’t take into account rent, utility, or education expenses, on the grounds that such costs are often covered by employers as part of executives’ compensation packages, and thus don’t represent out-of-pocket expenditures for the expats themselves.

Instead, ECA International compares “a basket of like-for-like consumer goods and services commonly purchased by assignees in over 450 locations worldwide,” including gasoline, movie tickets, a beer at a bar, or a fast-food meal consisting of a burger, French fries, and a soft drink.

▼ I’m guessing that by “burger” they mean an ordinary hamburger, not a deluxe Pikachu burger.

However, before you go throwing away your dreams of living or traveling in Tokyo, there are a few details to consider. First, ECA International’s calculations are based on price surveys done twice during the year, first in March and again in September. Between September of 2015 and September of 2016, the value of the yen, compared to other currencies, rose 19 percent, and this was indicated by researchers to be the primary reason Tokyo and other Japanese cities leapt up several positions in the latest ranking.

So while Tokyo became more expensive during that period in terms of how much things cost when converted to, for instance, their U.S. dollar equivalents, for foreign workers whose compensation is set in yen (a not-uncommon situation for foreigners working for Japanese companies in Japan), Tokyo really isn’t any pricier than it was back when it was down at number 12 on ECA’s list. It also should be mentioned that since September of 2016 the yen’s value (versus the U.S. dollar) has dropped 17 percent, meaning that increase in cost of living for dollar-compensated expats has largely been undone.

▼ Man, 500-yen coin, you used to be so much cooler.

Finally, there’s the question of how possible it actually is to find “like-for-like consumer goods” in different countries. Sure, Japan has movie theaters, just like the U.S. However, in Japan going to a theater is seen as a slightly more upscale outing than it is in the States. The same goes for drinking in a bar, as opposed to a restaurant that happens to serve alcoholic beverages. That upscale image makes many consumers see them as occasional indulgences, which leads to higher pricing for ostensibly higher-quality service.

Likewise, the prevalence of efficient public transportation in Tokyo means that driving around the city, especially its center, is often a discretionary luxury or an absolute business necessity, with that inelastic demand reflected in high prices that don’t really affect the average resident.

Even when comparing prices for foodstuffs, a “like-for-like” comparison can exclude unique locally sourced items, which are often going to provide the best value. I challenge anyone living outside of Japan to find a pack of delicious buri sashimi and shredded daikon for the equivalent of 225 yen (US$1.92), which is what I paid for this one from my neighborhood market in “fifth-most-expensive-city-in-the-world” Yokohama.

▼ Easily one of the greatest less-than-two-buck meals I’ve ever had.

So while Tokyo can be a pricy place to live as an expat, it can also be pretty affordable if you’re willing to live like a local.

Follow Casey on Twitter, where’s he’s still fondly reminiscing about that buri.